This story is from March 23, 2007

Can dark horse Torrent pull off the Merck deal?

Nimish Shukla & Swati Bharadwaj-Chand / TNN / Mar 23, 2007, 01:35 IST

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Torrent Pharmaceuticals (TPL) wanted to make a play for Merck's generic business, currently valued at $6.5 billion.

Can dark horse Torrent pull off the Merck deal?

AHMEDABAD: Folks in the pharma business rubbed their eyes with disbelief on Tuesday morning when news broke that Torrent Pharmaceuticals (TPL) wanted to make a play for Merck's generic business, currently valued at $6.5 billion. Wasn't TPL with a market cap of just Rs 1,722 crore biting off more than it could chew?
"There is a difference between foolishness and calculated risk," said Arun Kejriwal of Kejriwal Research and Investment Services."It all boils down to how the acquirer perceives the value of the target."
Currently, TPL has a limited presence in the international market. "There might be certain synergies that Torrent may be seeking to leverage by its audacious bid," admitted an analyst.
If the deal goes through, it will make TPL one of the 10 largest generic companies in the world and give the company instant access to markets which would otherwise take years to develop. More importantly, it can take on other global giants by using its low cost manufacturing base in India to its advantage while catering to the low margins generics business.

But that still doesn't answer the million dollar question. Does the dark horse have the panache and moolah to pull it off? Truth is, mergers and acquisitions are not new to the $1 billion Torrent groupwhich has a significant presence in the power sector.
TPL is among the few Indian pharma players to have taken the inorganic route to growth and tasted first blood in 2002 when it picked up Fornex Industrial Farmaceutica in 2002 and in 2005 Heumann Pharma GmbH & Co Generica Kg of Germany.
As far as financials go, Torrent group has a combined market capitalisation of over Rs 4,800 crore based on Thursday's closing price and a total networth of over Rs 3,000 crore.
Low debt component of around Rs 800 crore in its power and pharma business leaves it with room to leverage its financials. And with two global private equity players backing its bid, it could stand a fair chance of swinging the deal.

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